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Court says Legislature isn't done on McCleary. So what now?

The state Legislature needs to speed up its compliance with the Washington state Supreme Court's McCleary ruling, the court announced Wednesday in a unanimous 9-0 decision.

The court said that the Legislature isn't on track to meet its deadline, as its current solution won't completely go into effect until the 2019-20 school year. The actual court-mandated deadline is Sept. 1, 2018.

It appears that the Legislature might have to come up with another $1 billion in annual revenue in its 2018 session instead of waiting for new income to phase in during 2018-2019 fiscal year.

"As the court noted, the plan the Legislature adopted, but for the timing, will meet constitutional requirements,” said Gov. Jay Inslee in a press release.

Now, the Legislature will have to concentrate on speeding up compliance with the McCleary obligations in the 60-day 2018 legislative session that begins in January. The 60-day "short" sessions during even-numbered years are typically used for tweaking the biennial budgets approved in odd-number years — not for major overhauls. Therefore, the Legislature will have some heavy lifting to do in the upcoming session.

“At this point, we’ll have to wait and see,” said Thomas Ahearne, attorney for the McCleary plaintiffs.

Ahearne noted that the state government said it needed roughly $2 billion annually in new revenue to meet the 2012 McCleary requirements. A legislative compromise reached earlier this year set up $1 billion in new revenue for 2017-2018, and another $1 billion in annual revenue to added in 2018-2019. The Supreme Court said that second $1 billion is too late to make the legal deadline for compliance with McCleary to be reached.

“Implementing historic funding increases that actually work across 295 school districts and reforming property-tax collections throughout 39 different counties forced us to develop this specific timeline," Sen. John Braun, R-Centralia and lead Senate GOP budget writer, wrote in a press release.

"The final agreement (earlier this year) enabled us to make historic education investments that would be stable and practical to implement, as opposed to the alternative of years of roller coaster budgets for schools."

Further complicating things, neither the plaintiffs nor the state have a specific dollar figure in mind for meeting the McCleary requirements — that both teachers be paid competitively and that school districts have a ratio of one teacher for every 17 students in Grades K-3. The $2 billion is a rough guess by the state.

"Consequently, all sides will have to wait a while after the money is produced to see if the specific mandates are met," Ahearne said.

To meet its McCleary obligation, the Legislature could choose to modify a property tax overhaul it approved earlier this year. Under that overhaul, some school districts are seeing tax cuts and others, including many in the Puget Sound area, are seeing property tax increases.

Or more likely, the Democrats could return to their favorite idea for a new school funding mechanism: a capital gains tax.

With Democrat Manka Dhingra winning a previously Republican-held Senate seat — the 45th District in the northeastern Seattle suburbs — in a special election earlier this month, the Democrats now have control of the Senate. A Democratic-backed capital gains tax seems to be the easiest path to speed up its complying with McCleary in 2018.

For five straight years, Democrats have proposed a capital-gains tax to raise money for education. It's a 5 percent tax on individuals making at least $25,000 in a year, and on couples making at least $50,000 a year in capital gains. It is estimated that 32,000 Washingtonians would pay the tax, which would raise $550 million per budget biennium. Republicans in the Senate have stymied the proposal every year it has been introduced, but they no longer hold majority control over the Senate.

Another option? The Legislature could take money away from other services such as social services or health — an unlikely scenario with Democrats in total control of the statehouse.

“Many lawmakers, myself included, have had conversations with our school districts since the 2017 session concluded," said Sen. Christine Rolfes, D-Bainbridge Island. "We know some steps need to be taken to ensure they have the flexibility and funding they need to provide students with the best education possible and in the fairest way for taxpayers. This order reiterates the need for these conversations to continue and intensify.”

Currently, the court is fining the Legislature $100,000 a day for not complying with the McCleary ruling — an empty gesture because the Legislature pays the money to its own coffers. That money will then be distributed to legislators to decide where it's spent. Those fines will continue, the court announced Wednesday.

With this new ruling, the 2018 legislative session should be an unexpectedly dramatic one as the Legislature essentially goes back to the drawing board.

Story updated at 2:10 p.m. with reactions from members of the Legislature and the plaintiff's attorney.